Credit card point scheme sting

FINANCIAL institutions are supersizing the number of free rewards points on offer for customers signing up for their credit cards.

Experts believe the plastic industry is more competitive than ever and consequently consumers are being lured by attractive deals of up to 80,000 free points if they take on a new card.

Research by comparison website Finder shows some institutions have allocated an additional 30,000 free points to their card offers recently.

Finder spokeswoman Michelle Hutchison urges card users to work out whether the bonus points outweigh the costs of the card.

"In the past six months there have been quite a few institutions increasing their bonus-points offerings and that shows the increase in competition,'' she says.

"Consumers should look at the annual fees involved.

"And they need to be wary of the bonus-point offers and make sure they are someone who would benefit from a rewards card.''

She says the monetary value of each free point can vary from card to card and consumers should look at the fine print to determine whether they are getting bang for their buck.

Data shows there are now 37 cards on the market that offer bonus-points incentives, and card users can earn anywhere between 200 and 80,000 free bonus points when they sign up.

Some annual fees can be as high as $1200.

Nikki Carr, 40, has three cards and says she uses them because they are linked to the Frequent Flyer scheme.

"We use them for bigger things like furniture so the points accumulated is worthwhile and we use the points for free flights,'' she said.

"We don't pay our credit card off in full each month though.

"We pay off a sizeable amount and we've had the benefit from the points so it's definitely been worthwhile."

Independent consumer advocate Christopher Zinn says credit card rewards points can be beneficial if the user understands how they work.

"Some people will work the points system very well and show off all the things they got with points, but the people who end up paying for that are the people paying very high interest rates on their cards,'' he says.

"There are a bunch of people who will seek to make the most out of the points but actually end up paying a lot in interest in terms of balances they haven't settled in the pay-by period.''

Zinn says there are a lot of consumers who are "sucked in and seduced" by points and end up paying dearly for it.